Summary: A President Trump tweet sent the US dollar soaring overnight and New York traders added to the gains this morning. Global equity markets sank, oil prices plunged and safe-haven currencies are in demand. Then again, it may all be a mirage.
Arguably, Trump is grandstanding and giving the media something to write about on a slow news day. Treasury Secretary Mnuchin indicated good progress was made and last week suggested that the trade talks were on their final laps. So far, China’s 100-strong trade delegation is still coming to Washington for talks on Wednesday.
USDCAD rallied from 1.3421 at Friday’s close to 1.3491 this morning on the back of broad US dollar moves and a steep plunge in oil prices. WTI oil, at $61.68 is well-above its session low of $60.07, but USDCAD has ignored that rally. USDCAD is highly correlated with the US dollar Index. That correlation broke down on Friday but may be getting ready to re-correlate. If so, USDCAD may stay below resistance at 1.3490, and retreat to 1.3420.
Not surprisingly, Wall Street has taken it on the chin this morning. The three major indices are down about 1.3% in early trading. There isn’t any US data available to offset trade war jitters leading to some profit-taking.
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